Hybrid and electric vehicles are growing in popularity, albeit slowly. According to Experian's Q4 2022 State from the Automotive Finance Market Report, hybrid and electric models constitute 6.7% of recent vehicle financing, up from roughly 4.3% in 2022.
But more than two-thirds of individuals buying an electrical vehicle are former gas or flex-powered vehicle owners. If you're considering a switch, it's important to understand whether an electric or hybrid vehicle can in fact help you save money and, if so, just how much.
Does It Cost More to buy an electrical or Hybrid Model?
The cost of a new vehicle depends not just on the type of vehicle you buy but additionally on the model you select. Typically, here's the way the monthly payments exercise for each type of vehicle.
|Average Car Payment by Vehicle Key in 2022
|Average Monthly Payment
Source: Experian State of the Automotive Finance Market Report, Q4 2022
In short, switching to some hybrid car likely won't change your monthly payment drastically. But if you're looking at going right to an electric vehicle, you'll want to make certain your budget has enough room for any higher payment.
That said, car payments can differ widely depending on the brand name. For example, Tesla vehicles are usually on the expensive side, with average car payments for that Model 3 and Model Y pegged at $725 and $735 per month, respectively. In comparison, a Chevrolet Bolt EV costs just $410 monthly, on average. We review the most cost effective hybrid and electric vehicles here.
It's also important to note the possibility regulations you can get with all-electric and plug-in hybrid vehicles. The federal government offers a credit worth as much as $7,500, depending on the capacity from the battery in the vehicle and other factors. Some states offer additional incentives that may further lower the cost of your vehicle purchase.
These credits won't necessarily cut your payment per month, however, you could use these to make additional principal payments to pay down the loan early, saving you time and money.
What Are the Variations in Price of Ownership?
As seasoned drivers know, the cost of having a vehicle goes beyond the payment per month to your auto lender. You'll also have to consider fuel prices, discovered another means, repair and maintenance, insurance and more.
- Electricity vs. fuel: The University of Michigan Transportation Research Institute discovered that electric vehicles cost $485 per year to drive, in contrast to $1,117 for gas-powered vehicles. Just keep in mind that some areas may not have as numerous electric vehicle charging stations as others, so access should be a significant consideration.
- Repairs and maintenance: Because electric and plug-in hybrid vehicles have fewer moving parts than completely fuel-powered cars, you can expect to spend about half just as much on maintenance, based on research by Consumer Reports—that's typically $4,600 in savings over the lifetime of the automobile.
- Insurance: While an electrical or hybrid vehicle can help you save profit a number of ways, you can expect to pay more to insure one. According to a study by Self Financial, for example, you'll pay $442 more per year to insure an electrical vehicle in contrast to a gas-powered vehicle.
Keep in your mind that where you reside has an effect on just how much it'll cost to own an electric or hybrid model. Gas prices, insurance criteria and other factors that fluctuate by location can all affect just how much you have to pay for your new car.
Access to electric vehicle charging stations is yet another essential aspect to keep in mind. If you live within an area with several locations, you won't need to bother about losing sight of your way to charge your car's battery or running out on the road. However in some areas, and depending on how much you drive, you may want to take more time and effort keeping the battery going.
Accounting for all the ongoing costs of vehicle ownership is important: “You know, insurance, registration, gas prices or potential charging costs,” says Melinda Zabritski, Experian's senior director of automotive financial solutions. “If it's an electric vehicle, is it necessary to have anything installed at your house . for that charging?”
How to determine Which Type of Car Is for You
Choosing between an electrical or hybrid vehicle and a fuel-powered car may seem like a simple decision or a difficult one, based on your situation and preferences. But there are many factors to keep in mind while you make your mind up.
- Feelings on gas emissions: Many people change to electric or hybrid vehicles because they worry about the environment and want to reduce their contribution to the emissions that fuel-powered vehicles released. Of course, going electric doesn't bring your emissions right down to zero, as electricity can be produced from burning coal or gas, among other sources. But it can still create a huge difference, and if that's important to you, electric and hybrid vehicles offer a major advantage.
- How you utilize your vehicle: If you are using your vehicle primarily to commute, you will need to think about the length of your commute, gas mileage on cars you're considering and gas prices in your town. If you go on a large amount of car journeys, you might find that electric vehicle charging stations are much less plentiful than gas stations. Also, if you spend considerable time outdoors, including traversing dirt roads and rough terrain, the kind of vehicle you need may not be obtainable in electric or hybrid form.
- Upfront costs: While operating an electrical or hybrid vehicle is typically cheaper with time, and you can receive tax credits for getting one, electric vehicles tend to be more expensive than gas-powered vehicles when you compare similar models. If you finance the automobile, you can spread that extra cost over several years, but if you're making a down payment, it'll typically go further having a fuel-powered vehicle.
- Convenience: Electric charging stations are increasing in number, and there are apps will find ones close by wherever you're. However they are still not as plentiful as gasoline stations, so you may need to go from your way to find them. What's more, it requires time to charge your automobile. If you're on a long journey, for instance, you may want to add several hours to your trip simply to get to your destination. If you are making use of your car primarily to commute and can charge your vehicle in your own home for most of your needs, however, it isn't really a problem.
The Bottom Line
Electric and hybrid vehicles can help you save money with time, however the financial facet of having a car isn't the only one to consider.
“I would actually treat it as any other purchase, where you're looking at your overall costs and the pros and cons before buying,” Zabritski says.
Take your time and effort to think about all the factors which go into owning a vehicle and how it might impact your choice to purchase a certain type of car. Once you've made your choice and therefore are prepared to purchase your new vehicle, make certain your credit is incorporated in the best shape possible before applying for a financial loan. You can get your free credit rating and credit report to discover what your location is, and do something to enhance your credit which means you get the best rates and terms on your new car loan.